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Standard Chartered rejects Iran claims, shares plunge

Shares in emerging markets specialist Standard Chartered Bank have plunged after US regulators charged that it hid $237 billion in deals with Iranian banks in violation of US sanctions.

The charges - strongly rejected - are the latest in a series of damaging scandals to hit London's global financial centre where light-touch regulation was hailed as a major benefit of the 1980s 'Big Bang' market deregulation.

Standard Chartered shares crashed 16.76 per cent in London trade, having been down a quarter at one point, slashing the bank's value by almost STG6.0 billion ($A8.9 billion).

"Bad news for banks once again as the daggers are out for Standard Chartered with US regulators flexing their muscles," said Capital Spreads boss Simon Denham.

"The stock is being absolutely smashed ... as investors fear that they might have actually been doing something illegal for years."

The US Department of Financial Services said Standard Chartered systematically disguised foreign exchange deals with Iran that potentially opened the US banking system to terrorists and criminals.

For its part, Standard Chartered said it "strongly rejects ... the portrayal of facts as set out" by the DFS.

"The group does not believe the order issued by the DFS presents a full and accurate picture of the facts," group secretary Annemarie Durbin said in a statement to the Hong Kong stock exchange.

Standard Chartered was ordered to appear on August 15 to explain the "apparent violations of law" and demonstrate why its licence to operate in New York should not be revoked.

"For almost 10 years, SCB schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion," the regulator said.

Standard Chartered falsified transaction reports and obstructed oversight "in its evident zeal to make hundreds of millions of dollars at almost any cost".

The transactions mainly involved US dollar transfers for state-owned Iranian banks, including the central bank, that fell under US controls aimed at undermining Tehran's alleged nuclear weapons program.

The activity "left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes", the DFS said.

There was also evidence of possible illegal transactions with Burma, Libya and Sudan while they were under US sanctions.

The bank, which focuses on Asia, the Middle East and Africa, said it was surprised at the claims as it had informed US agencies in 2010 that it had voluntarily launched an internal compliance review.

It said the review "did not identify a single payment on behalf of any party that was designated at the time by the US government as a terrorist entity or organisation".

The bank also said it had stopped all new business with Iranian customers more than five years ago.

"The group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws and regulations," Durbin said. "We intend to discuss these matters with the DFS and to contest their position."

The bank could face steep fines if found guilty.

Justin Harper, market strategist for IG Markets in Singapore, said being tagged a "rogue bank" by a US regulator was a severe blow.

"They have got a good reputation in the industry which will be tarnished by these accusations, whether they prove accurate or not," he told AFP.

But Kathy Lien, managing director at the New York-based BK Asset Management, said she doubted the bank would be brought down by the scandal.

"At worst, they will get a slap on the wrist and pay a fine," she said.

In July, a US Senate report accused London-based HSBC of concealing more than $US16 billion in sensitive transactions with Iran and Mexican drug lords over 2001-2007.

In June, ING Bank was fined $US619 million for its role in processing $US1.6 billion through the US financial system for Burma, Cuba, Iran, Sudan and Libya.

Last month, Barclays was fined STG290 million by British and US regulators after admitting that it attempted to manipulate the Libor and Euribor benchmark interest rates between 2005 and 2009.